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By Pat Hamel, CPA, and Pamela Rafferty, CPA, Hamel Associates, Inc.

QPLAN is a Windows-based program which can be used to build comprehensive financial spreadsheets for sophisticated taxpayers or simply to prepare income tax projections for those with more basic needs. Simple input screens are used to prepare a variety of spreadsheets. The level of detail included in the spreadsheets depends entirely on the level of detail chosen to input.

QPLAN also includes a database system which enhances the use of the program for centralized office control and oversight. It is also adaptable to the office LAN.

The financial projections may be prepared in accordance with the AICPA's Statement of Position (SOP) 82-1, Accounting and Financial Reporting for Personal Financial Statements in that it provides a provision for deferred income taxes.

QPLAN should be viewed as a system with three basic components Administrator, Planner, and Ad Hoc Reporting.

The Administrator

In the Administrator, "Office Globals" are set which will apply to all clients. These Office Globals include the following:

* Projection Values--rates of inflation, deflation, for a wide variety of assets, income, expense, and deferred taxes. This feature provides for consistency in the assumptions being used for all clients within the office. Any deviations from these assumptions must be overridden manually.

* List Maintenance--occupations of advisors, insurance carriers, and types of living expenses so that the user can customize the input screens for the office.

* Spreadsheet Defaults--sets the
fonts for building spreadsheets
including column widths and headers.

* Securities--Stocks, Bonds, Mutual Funds, Other, and Money Market. Before a client may "purchase" a security, it must be entered as a Global in the Administrator. QPLAN makes adding securities easy by including some 9,000 stocks including ticker symbols and CUSIPs and Standard Industry Codes, 1,500 bonds including CUSIPs, and 6,000 mutual funds including ticker symbols and CUSIPs. These are referred to as "Universals."

* Direct Investments--Real estate investments, oil and gas deals, and the like.

* Advisors--attorneys, security brokers, insurance sales people, and others who may be advising clients of the firm.

Updating security pricing may be made through the use of the Muller Data services currently via diskette, but soon through modem downloads. This is the database price of the equation, and entries made here will be available on the individual client input screens.

The Planner

The Planner is where specific client data is entered on simple input screens. On the Planner screen are 18 "buttons" for selecting the specific input screens:

* Client--for basic client information. It should be noted that QPLAN recognizes two different classes of clients--individuals and trusts. If the client is an individual and not married, the screen will not show input for a spouse. If the client is a trust, the screen changes to ask about the trustee, when the trust was created, and beneficiaries.

* Advisors--for the different advisors of the client.

* Security Purchases--Stocks, Bonds, Mutual Funds, Other, and Money Market Funds, each of the different categories of securities is reflected as a tab similar to a file folder tab.

* Security Sales--for each of the above categories. The program allows for normal sales, short sales, and writing call options.

* Employment--allows for the identification of employers. Other tabs include salary and bonus information and withholding. The user may also enter information directly from a pay stub for year to date, pay per period, and the number of pay periods remaining.

* Living Expenses--A number of categories of Living Expenses may be entered with individual Global Inflation Rates. On the client input screen, these Global rates may be over-ridden.

* Assets--this will store asset values for residence(s), autos, and other personal assets with inflation (depreciation ) factors available from the office Globals, or may be over-ridden by the user. On this screen, and many other places in the program, there are available "look through" buttons to take you from the current screen to an associated screen. For example, when the user is making an entry on an Asset screen, there is a button to move onto the mortgage or liability screen to enter the related mortgage information.

* Liabilities--are entered with "pull down" boxes reflecting the possible types of collateral for loan(s) and mortgages of different types.

* Taxes--the program currently supports resident and non-resident income taxes for New York, New Jersey, and Connecticut with the anticipation of adding the balance of the states in the next few months.

* Miscellaneous--is a "catch all." Here the user may enter items of taxable income or cash flow not contained on other screens, such as income from trusts and inheritances.

* Itemized Deductions--for the "few" remaining itemized deductions allowable under the income tax code as we now know it. There are "normal deductions," deductions subject to the 2% floor, and other deductions not subject to the 2% floor (i.e., moving expenses).

* Employee Benefits--contains provisions for IRAs, 401(k)s, and pension and profit sharing plans. These accounts may be "linked" to portfolios or amounts with inflation factors.

* Employee Stock Options--contains all of the information for non-qualified, incentive stock and restricted stock options including their vesting and lapse dates.

* Businesses--Information is entered regarding a business owned by a client. Expenses may be entered as an amount subject to inflation or a percentage of gross income. One nice feature of this program is that it allows the user to determine the value of the business based upon a number of different factors or as a number subject to inflation. However, it does not discount for a business where the taxpayer is a minority owner.

* Direct Investments--the place for the input of partnership and Sub-S Corporation information in terms of "units." The balance of the information is contained in the Direct Investment Global on the Administrator.

* Rental Properties--contains all of the information for the input of a rental property. Again, it does not provide for a partial interest.

* Insurance--is the place to enter all
of the insurance coverage owned by the taxpayer including life, casualty, and umbrella.

* Estate--provides for all of the estate and gift information including credit shelter trust, qualified residence trust, life insurance trust, qualified domestic trust (in the case of a non-U.S. citizen). It also provides for the accumulation of gifts in excess of the annual exclusion.

After the input has been entered, the spreadsheets to be included in any analysis is selected.


There are a wide number of spreadsheets available depending on the level of input detail. In addition to the obvious spreadsheets for businesses, portfolios, rental properties, and employee benefits and options, QPLAN takes the information from these "basic" (not requiring information from other spreadsheets) spreadsheets and builds the statement of net worth, income
statement, and cash flow statement.

Since the user can select how many years should be projected, the Estate spreadsheet is based upon the projected statement of net worth in the year that the planner wishes to evaluate. This is an interesting feature since it allows the user to view the estate tax (Federal only) picture in a future year. The planner can then evaluate a number of estate tax savings devices and show the client the results.

Other spreadsheets which may be created include the following:

* Total Return Analysis for a selected period of time by account.

* Asset allocation on the basis of gross assets or net of deferred taxassets.

* Security Portfolio Structure shows the stocks owned by industry, bonds by maturity, and mutual funds by investment theme.

If desired, these spreadsheets can be imported into Microsoft Excel.

Ad Hoc Reporting

QPLAN maintains all of the client information in a data base, the planner may generate reports for the office on such matters as a) which clients own a given stock, b) what is the total value of all securities held by clients of the office, c) which clients have a birthday this month and similar miscellaneous information.


QPLAN is a comprehensive analytical tool that allows the planner to evaluate a client situation based upon all of the facts known to the planner. However, it is also simple enough so that the planner may limit its use to income tax projections for some clients if that is all that is needed. QPLAN contains many other interesting features (like a time keeper and What If feature) a description of which is beyond the scope of this review.

Capital needs analyses such as survivor capital sufficiency and retirement planning is lacking in the program. Integration into Windows 95 will be available soon.

QPLAN is a professional product which should be of benefit to the starting financial planner as well as the most experienced. It was developed by Roy Quarve, CPA, based upon the comprehensive spreadsheets that he created for counseling clients for the past 15 years.

It responds to the need for financial planning software which can generate spreadsheet analyses and financial statements from simple and basic input screens. In addition, Quarve was in search of a product which included a data base feature allowing the planner to view similarities of clients across an entire practice. QPLAN, Version 1.02.05, is available from QPLAN, One Atlantic Street, Stamford, CT 06901, (203) 356-1910. *


By Vernon Jacobs, CPA, Asset Protection Strategies Research Press

On July 30, 1996, President Clinton signed the Taxpayer Bill of Rights 2.

The most publicized part of the bill is the provision that permits taxpayers to sue the U.S. government for up to $1 million in damages. Previously, the limit was $l00,000. According to one commentator's explanation of this provision, taxpayers still have a lot of obstacles to overcome in order to win a judgment from the IRS. First, the taxpayer must show that an IRS officer or employee recklessly or intentionally disregarded some provision of the IRC in connection with the collection of taxes. "Mere negligence or carelessness on the part of the IRS does not create a cause of action under this provision." Second, this rule does not apply to the agents who conduct the audits. It only applies to the ones who are trying to collect the taxes the auditor say you owe. Third, the amounts that can be awarded are for actual damages only. There is no provision for punitive damages. A related provision allows taxpayers to sue the IRS if any IRS employee attempts to entice tax advisors into disclosing information about the taxpayer.

Another provision of the bill may provide even greater relief to more taxpayers. This provision limits the authority of the IRS to issue regulations that have retroactive impact. However, this new rule can be superseded by legislative authority. (Clearly, the lawmakers realize they are implementing retroactive laws and apparently have no intention of stopping the practice.)

For many years, the government has been trying to create a position in the IRS that will provide a safe haven for abused taxpayers. Currently, that position is known as the Taxpayer Ombudsman. However, that position is subordinate to many other IRS positions and has often been thwarted by those higher ranking IRS employees. The new law creates a new position called the Taxpayer Advocate and gives that person a little more clout than the Taxpayer Ombudsman had. The succession of past efforts to give taxpayers a source of relief in the IRS has been far less successful than was expected by each previous enabling law.

Meanwhile, this bill gives the IRS explicit authority to disclose information on cash transaction returns for reporting cash transfers of more than $10,000. The disclosure can be to other government agencies (city, county, state, etc.) For purposes of any civil, criminal, or regulatory purpose, the new law also allows the IRS to offer rewards for information regarding civil as well as criminal violations of the law. Another provision extends the IRS's authority to use the income they secure from undercover operations to pay the expenses of those operations. *


By Robert E. Harrison, CPA, JD, LLM, Trends & Developments, Richard A. Eisner & Co.

Corporate employees are frequently granted nonqualified stock options to purchase stock of their employer. A recent IRS private letter ruling (PLR 9616035, January 23, 1996) confirms an advantageous approach to using these options to reduce estate and gift taxes.

Under the facts in the ruling, an employee of a public company was granted nonqualified stock options. The employee was the only member of his family owning stock of the company and the company was not aware of any person who was the beneficial owner of more than five percent of the company's outstanding stock. The company's stock option plan was being amended to permit transfer of the options to immediate family members. The private letter ruling held that the results of transferring the options to an immediate family member as a gift would be as follows:

1. No taxable income would be recognized on the transfer of the stock options to the family members.

2. If the transferee-family member subsequently exercises the stock options--

a) The employee (or his estate, if he is not living) will be deemed to receive taxable compensation income equal to the excess of the fair market value of the stock received over the exercise price. The employee will be liable for the income tax on this income, so that the tax reduces the employee's taxable estate. b) The company will be entitled to a compensation deduction equivalent to the amount of compensation deemed realized by the employee. c) The transferee-family member's tax basis in the stock acquired via exercise of the option will be its fair market value on the date of exercise (i.e., the sum of the exercise price and the compensation income deemed recognized by the employee).

3. The transfer of the stock options to the family member will be a taxable gift on the date of the transfer. The amount of the gift will be the fair market value of the options on that date, and the special valuation rules under Chapter 14 of the Internal Revenue Code will not apply to this gift. Since the gift constitutes a present interest, it is eligible for the $10,000 annual per donee exclusion. Actual payment of gift tax may also be avoided by use of any available portion of the $600,000 unified credit equivalent and/or gift splitting with a spouse.

4. Once the gift is complete, neither the stock options nor the stock obtained upon exercise will be includable in the employee's taxable estate. As a result of these holdings, all appreciation from the value used for gift tax purposes escapes estate and gift taxation. Moreover, even though the transferee receives the full economic benefit of the spread on exercise of the options, the transferor's payment of the income tax liability on this spread should not be deemed a taxable gift. *

Milton Miller, CPA

Contributing Editors:
Alan Fogelman, CPA/PFS
Clarfield & Company P.C.

David Kahn, CPA/PFS
Goldstein Golub, Kessler & Co.. P.C.

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